Drought of Ideas in Congress Is Worse Than in Farm Belt

The worst drought in more than a
half-century is gripping most of the U.S. Midwest and South,
damaging crops and presaging higher food prices.

Congress is deadlocked as it tries to pass a new farm bill,
as it does every five years, amid demands for broad emergency
assistance for the hardest hit areas.

This impasse may be the best thing that one could hope for,
considering the flaws in the proposed legislation. Instead of
trying to adopt a new bill before its August recess, Congress
should approve a one-year extension of the current law and
create a narrow aid package aimed mainly at livestock producers.
As bad as the existing law is, there is no reason to replace it
with legislation that’s even worse.

Although some ranchers might need emergency aid, existing
crop insurance protects 85 percent of the nation’s cultivated
land against losses, according to the U.S. Department of
Agriculture. This summer’s drought also follows a year when farm
net income was a record $98 billion, thanks to some of the
highest commodities prices ever.

This isn’t to play down the severity of the drought, which
started last winter with reduced snowfall. More than half the
country is officially in a drought, and the Agriculture
Department has declared 1,300 counties -- about a third of the
nation -- disaster areas. Much of the U.S. corn crop, the
world’s largest, has been damaged, and some of it has been
destroyed.

Food Prices

The drought will eventually affect consumers. The
Agriculture Department forecasts price increases of 3 percent to
4 percent next year. Even so, one upshot could be a temporary
decline in some food costs: Many farmers are harvesting damaged
corn crops for animal feed, and ranchers are slaughtering more
cows and pigs than anticipated this year to avoid having to use
more expensive grain next year.

What is Congress doing about this potential national
crisis? Making things worse, alas, which has too long been the
rule in U.S. farm policy. Both the Senate and House versions of
the farm bill would encourage practices that make the
agriculture industry more vulnerable to drought damage.

The bill would achieve some savings by reducing land
conservation payments by $6 billion in the next decade, while a
generous new crop insurance subsidy would provide an incentive
for farmers to plant on marginal grasslands and wetlands. These
soils are more prone to erosion and permanent damage, with
yields more susceptible to unfavorable weather. The legislation
gives farmers incentive to bring these areas into production. If
they plant and the harvest is bountiful, they win; if nature or
markets turn against them, taxpayer-subsidized insurance
programs bail them out.

This was supposed to be the year of farm-bill reform.
Congress eliminated the $5 billion in annual direct payments to
farmers. But it replaced one indefensible jackpot with another,
offering crop insurance that would put at least an additional $3
billion a year into farmers’ pockets, and possibly much more if
commodities prices fall.

Such a benefit would be on top of existing crop insurance
programs, whose total cost this year might amount to as much as
$9 billion. This isn’t insurance that compensates farmers for
actual losses; it’s a wealth transfer, plain and simple.

Cost Savings

What makes the proposed farm bills even more heartburn-
inducing is how they achieve cost savings. Both House and Senate
versions chip away at the Supplemental Nutrition Assistance
Program, or food stamps, which makes up about three-fourths of
the roughly $1 trillion the government will spend on agriculture
programs in the next decade. The Senate came up with $4.5
billion in cuts, and the House proposes $16 billion.

Congress says these cuts will end waste and abuse. Although
there are valid criticisms of the food stamp programs, such as a
lack of restrictions on purchases of junk food, the Agriculture
Department has already done much to reform it, including
curtailing trafficking in electronic benefit cards. What’s more,
denying benefits to people barely above the poverty line -- some
2 million may be affected -- is an venal way to finance
subsidies for farmers.

If Congress extends the current bill, as we suggest, it
still must enact new legislation next year. Ideally, House
leaders would bring the same zeal to cutting farm subsidies that
they applied to food stamps. Congress could start by creating a
crop insurance safety net that isn’t an income-maintenance
device, paying farmers only when they incur actual losses. Some
analysts have even suggested cutting out inefficient private
insurers from this process to save money. Either way, Congress
should end the intravenous fiscal drip that the agriculture
industry has come to depend on.